BAKU, Azerbaijan, Sept. 23
By Tamilla Mammadova - Trend:
Forecast of Georgian real GDP growth for the third quarter (July-September) of 2020 remains at -11.6 percent, unchanged from last month’s prediction, Trend reports referring to ISET-PI, a think-tank based at the International School of Economics of Tbilisi State University.
"In August, Georgia’s exports experienced a 7.5 percent annual decline. This drop was driven by reduced re-export of motor cars and trucks, export/re-export of motor cars, cigarettes, and tobacco products to Azerbaijan, alongside the declining export of chemical and mineral fertilizers and mechanical equipment to Turkmenistan; export/re-export of motor cars and medicines to the Kyrgyz Republic; and export of ferroalloys and sheep/goats to Iran. There was, moreover, a significant decline in the export of goods to the European Union motivated by a drop in the export of copper ores and concentrates to Romania," the report said.
At the same time, Georgian exports to Bulgaria and China (due to improved re-export of copper ores and concentrates and precious metals), and Turkey (due to increased export of ferroalloys and textiles) experienced notable growth.
During this period, the import of goods decreased by 19.3 percent, driven by a reduction in petroleum and fuel product imports from Turkmenistan (mostly due to reduced crude oil prices on the international market), packaged medicines, and non-ferrous metal structures from Turkey, packaged medicines and tobacco products from Ukraine, and fewer imports from Japan, Romania, Germany, and Iran. Consequently, the trade deficit shrank dramatically by 27.1 percent yearly, and amounted to $350.8 million.
"According to our model, another negative contributor to growth was the increased consumer price index, compared to the same month of the previous year. In August, the annual inflation of consumer prices amounted to 4.8 percent, which is notably higher than the targeted 3 percent. Approximately 2.4 percentage points of CPI inflation were related to higher food prices (9.1 percent annual increase), while tobacco prices contributed 0.4 percentage points (13.4 percent annual growth). However, decreased oil prices (22.5 percent annually) made a notable negative contribution (0.8 ppts) to the annual inflation measure," the report said.
As reported, the National Bank of Georgia (NBG) has reduced the Monetary Policy Rate (MPR) three times over the past several months: in April by 0.5 ppt and in June and August by 0.25 ppt each, decreasing the MPR to 8 percent.
This move has been calculated as a monetary policy measure to stimulate economic recovery. In September, however, the monetary policy committee of NBG decided to keep MPR unchanged due to significant depreciation of the national currency and risks of emerging inflationary expectations.
The other group of variables that experienced notable monthly and yearly changes in August and made a small positive contribution to the 3Q2020 and 4Q2020 forecasts, was the volume of National Currency Deposits in commercial banks. The largest yearly increase was observed in National Currency Time Deposits with Maturity Less than 3 months–a 142.6 percent increase relative to the same month of the previous year. The second largest yearly increase was experienced within National Currency Time Deposits with Maturity More than 12 months–a 110.6 percent increase year-over-year.
The growth was relatively moderate in the case of Foreign Currency Deposits in commercial banks. As a result, deposit dollarization reduced by 1.3 ppts to 60.7 percent.
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